IP NEWS

Federal Court of Appeal finds that online music previews are fair dealing

14/06/2010

In a key decision in May 2010 the Federal Court of Appeal found that music previews used by consumers before deciding to buy a particular piece of music online constitutes fair dealing under the Copyright Act.

The Copyright Act allows copyright collectives such as Society of Composers, Authors and Music Publishers of Canada (“SOCAN”) to propose tariffs to the Copyright Board which can fix tariffs for royalties to be collected on behalf of copyright owners. Tariffs cover such diverse areas as commercial radio broadcasts, music while on hold on the telephone and blank recording media.

This appeal arises as a result of a decision of the Copyright Board that was asked to consider a tariff proposed by SOCAN for online music downloads. The proposed tariff had a higher rate for downloads with a music preview than for downloads without a music preview. There was no separate tariff for the preview alone. A music preview is generally an excerpt of 30 seconds or less of a piece of music that can be streamed or accessed over the Internet so that consumers are allowed to listen to the music to help them decide whether to purchase the entire sound recording.

The Copyright Board found on its own initiative that music previews were considered fair dealing within the meaning of the Copyright Act and therefore the tariff would not be applicable. The parties did not have an opportunity to make submissions to the Copyright Board on this point and learned of the ruling through the decision. The Federal Court of Appeal agreed with the parties that they should have been heard on such an important issue. The parties requested that the Federal Court of Appeal deal with the issue rather than remit it back to the Copyright Board for further consideration.

The Copyright Act provides several exceptions for acts considered fair dealing that are then not considered to be copyright infringement. These acts include: research and private study; criticism or review; and news reporting.

The central issue before the Federal Court of Appeal was whether a music preview constituted “research” fair dealing within the meaning of section 29 of the Copyright Act. The Federal Court of Appeal found that the Copyright Board decision to find fair dealing was not in error.

The Federal Court of Appeal provided an analysis of the Copyright Board’s decision and the parties’ allegations. The starting point for the analysis was the Supreme Court of Canada decision in CCH v. Law Society of Upper Canada [2004] 1 S.C.R. 339 where the Court stated that the word “research” must be give a large and liberal interpretation to ensure that user’s rights are not unnecessarily restricted.

The submissions demonstrated that research like many words can have several meanings. The word “research” generally has two meanings: (1) The action or an instance of searching carefully for a specified thing or person; (2) A search or investigation undertaken to discover facts and research new conclusions by the critical study of a subject or by a course of scientific inquiry. SOCAN preferred this last definition and argued that sampling music through music previews did not fall within the meaning of research. The Copyright Board, affirmed by the Federal Court of Appeal, found that music previews were a form of research in that the consumer is “searching for an object of copyright that he or she desires and is attempting to locate and wishes to ensure its authenticity and quality before obtaining it”.

SOCAN also attempted to argue that the purpose of the preview is sales and profits of the owners and not research of its users. The Federal Court of Appeal noted that while this may be true, the more sales made after preview, the more profit to the owner. The proper analysis is to view the music preview through the eyes of the person for whom they are intended, the consumer. The purpose of the preview is to assist the consumer in seeking and finding the desired musical work.

SOCAN also submitted that the amount of the dealing was a factor. SOCAN submitted confidential figures showing the aggregate number of users and resulting hours of uncompensated music. While the Court found that these figures submitted for a single year in 2006 were surprising, it also found that these figures could not be verified or tested in an adversarial process before the Federal Court of Appeal. The Court also noted it was not clear whether this analysis was meant to replace the analysis of the Copyright Board that measured the amount of the dealing by comparing the preview with the entire work it was previewing. The Federal Court of Appeal also questioned what weight the factor presented by SOCAN should be given. In the final analysis the Court decided that these types of questions regarding the amount of the dealing are best left for another day.

The implications of the decision are significant, since Courts in Canada will now be open to more expansive uses of the word “research” to strike a balance between the users of copyright and the creators of copyright. The Federal Court of Appeal observed that previews, (and by extension, other “research”) promote the interests not only of consumers, but also the copyright owners by increased sales.